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SCT Inst: gaining traction one year on

Launched by the European Payments Council (EPC) on November 21 2017, SEPA Instant Credit Transfer, aka SCT Inst, is an instant payments (IP) solution enabling credit transfers within the SEPA area to be made in less than ten seconds.

In this interview to mark the first anniversary Javier Santamaría, chair of the EPC since June 2012 and a member since its creation in 2002, reviews the progress of SCT Inst over the past 12 months and the further evolution that lies ahead.

SCT Inst went live a year ago with around 600 payments service providers (PSPs) across eight European countries. 12 months on, the totals have grown to 2,042 PSPs in 16 countries. At inception, the EPC indicated that it hoped the scheme would achieve critical mass by late 2020 – are you on track?

Indeed, EPC remains confident that a critical mass of SCT Inst scheme participants will be reached by the target date. In only one year the EPC has already made SCT Inst a success story; therefore, we remain convinced that market forces will help it reach ubiquity by 2020.

At the launch of SCT Inst you mentioned that you expected some challenges ahead? Has the roll-out to date been smoother than expected, or have you indeed encountered obstacles? If “yes”, how have they been addressed?

The first challenge was the brief window in which PSPs had to prepare. EPC had published the scheme’s rulebook in November 2016 for an operational starting date of November 2017. The PSPs willing to adhere to the scheme from its beginning had to achieve considerable changes in just one year, adapting their IT systems to make them real-time and available 24/7/365, as well as establishing back-up arrangements for them, upgrading their operational and risk management processes such as fraud detection, their clearing and settlement arrangements, and developing and promoting this new service to their customers.

We think these remain the challenges to be met by any PSP implementing SCT Inst. Notwithstanding the challenges they face, overall, the roll-out is being deployed according to expectations and we have not encountered any significant obstacles other than those foreseen.

EBA Clearing’s RT1 instant payment system, which also launched at the same time, has already passed the five million transaction mark ahead of its first anniversary. What have been the drivers of this rapid growth?

RT1 system provides SCT Inst infrastructure services at a pan-European level. The EPC, being only a scheme manager, does not manage any infrastructure. However, the recent announcement of the landmark by EBA Clearing is a reflection of the current growth of SCT Inst volumes and participating PSPs, and must, therefore, be considered very good news, and a signal that PSPs are increasingly implementing solutions that are used by their customers, the underlying driver of the growth produced.

Some reservations were expressed at the outset over the security of the SCT Inst scheme. Have these concerns proved unfounded, or has regular monitoring succeeded in avoiding any security issues?

The EPC advocates security awareness amongst the various stakeholders in the payment ecosystem to maintain the high level of trust in the SCT Inst scheme. This is done by highlighting and helping to address potential risks to the scheme through tools such as a Risk Management Annex.

The EPC, together with payment stakeholders, constantly monitors the development of SCT Inst in the market and regularly updates the scheme and its tools to reflect market needs, evolutions in technical standards and past major events. Efforts on security should never be relaxed as final victory cannot be claimed – this is why the EPC considers monitoring on security as a critical on-going activity.

At its launch, you stated that the main aim of SCT Inst was to replace cash and cheque transactions. A number of countries – for example those in Scandinavia – have made much greater strides towards a cashless society than some of their European neighbours. Are they the ideal market for a scheme like SCT Inst?

The Scandinavian countries aren’t yet part of SCT Inst, but have their own national instant payment schemes. However, Scandinavian experiences show that instant payments are an excellent substitute for cash in many use cases which reassures the EPC about the fitness of the SCT Inst scheme.

SCT Inst currently enables customers to transfer up to €15,000 between accounts within seconds around the clock. You indicated that this maximum figure would be reviewed after the first year – is it set to be increased so businesses make greater use of the scheme?

The maximum amount an originator can transfer via a single SCT Inst Instruction is currently set at €15,000. The Scheme Management Board (SMB) is currently assessing if there is already a need to adapt the maximum SCT Inst Instruction amount. Reactions to market demands, when identified, will be adopted in a very agile manner.

Do you expect blockchain technology to play a key role in the future development of SCT Inst and if so, what will it contribute?

The EPC does not have a crystal ball to predict the future, but we are monitoring the evolution of technology relevant for payments. The evidence is that innovative payment methods like SCT Inst and related value added services are being progressively developed.

Has there been interest in SCT Inst from other regions of the world? Could it become a template for similar schemes outside of Europe, or would it need amendments before other regions could adopt it?

SCT Inst is limited to the SEPA geographical scope of 34 European countries and territories. However, SCT Inst marks a major change in European payments and offers a tremendous opportunity to PSPs to satisfy their customers in the digital age as well as harmonising payments in Europe, which could be a good example for other regions of the world. In addition, the EPC grants licences enabling the use of the elements of the SCT Inst scheme for non-euro transactions thereby fostering harmonisation beyond the euro.

Finally, what additional plans do you have for the further evolution of SCT Inst over the next few years?

As mentioned earlier, we feel confident that a critical mass of PSPs across SEPA will have joined the SCT Inst scheme by the end of 2020. And generally speaking, SCT Inst scheme will further evolve based on experience, market demand and technological advances. Some new features have already been implemented in the scheme, like the repayment functionality – effective in November 2019 – and others will be developed in line with the scheme management process in place at the EPC to follow market needs closely.

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